tv Nightly Business Report PBS February 26, 2011 1:00am-1:29am PST
station from viewers like you. captioning sponsored by wpbt >> tom: good evening and thanks for joining us. my colleague susie gharib is off violence in libya has pushed crude oil to its highest level in 2.5 years. u.s. oil futures rallied to over $97 per barrel. brent crude oil ended at over $112 per barrel. one fear is supply, even though libya pumps less than 2% of the world's oil. opec has promised to open the spigots to make up for any lost production. but as erika miller reports, it's fear of bigger disruptions and worries about the type of oil being pumped that has the markets so nervous. >> reporter: quick, what's the largest oil-producing nation in the world? if you answered saudi arabia, you are wrong. ( buzzer ) that country is actually number
two after russia. the third-largest producer may be even more surprising-- it's the united states, followed by iran and china. libya is the 17th largest producer, with less than 2% of the world's supply. saudi arabia already has started to increase production to compensate for the loss of roughly a million barrels per day of libyan oil. but oil expert jeff mower says there's an even bigger worry than making up for lost libyan oil. >> there is a concern that what if this spreads? i imagine that's part of the crude price rally recently. what if this spreads to other countries, some place like saudi arabia? >> reporter: for the oil markets, what's important is not just the quantity of oil, it's the quality. libyan crude is sweeter and contains less sulfur than saudi arabia's, so it's easier for european refiners to use libyan oil to make diesel fuel. >> it's more efficient for a lot of refineries, especially in europe, to run lower sulfur
crude in order to get lower sulfur diesel products. it's simply more efficient. if you take a lower sulfer crude, you are simply getting more barrels of low sulfur diesel, which is in higher demand over there. >> reporter: the u.s. and other nations also have the option of dipping into emergency oil reserves to drive down prices. but oil analyst faisel khan does not think it's necessary. >> there seems to be plenty of crude oil in the u.s. you've got plenty of crude coming down from canada. u.s. domestic production has been growing, mexican production has kind of stabilized, and we continue to get imports from venezuela. so, net-net, i think the u.s. is actually relatively well supplied for crude oil. >> reporter: that may be true, but a few lawmakers are already urging the president to release a small, symbolic amount of oil from our reserves. the goal would be to show that the u.s. is prepared to act aggressively to prevent a spike in prices. erika miller, "nightly business
report," new york. >> tom: if you're looking for more on where oil prices may be headed, we have a closer look at the oil price chart and some technical analysis on "exchange, the nbr blog." you'll find it on our website, nbr on pbs.org. here are the stories in tonight's n.b.r. newswheel: some upbeat news on the consumer helped stocks shake off a rough week. at the bell, the dow rose almost 62 points, the nasdaq added 43 and the s&p 500 was up 13.75 points. trading volume? 953 million shares moved on the big board, just under two billion on the nasdaq. well, you, the consumer, must be feeling a bit better. consumer sentiment has hit its highest level in three years. the reuters/university of michigan survey's final february reading rose to 77.5, showing that so far consumers are weathering higher gas prices. the u.s. economy picked up steam as last year came to a close, but it didn't grow as fast as
originally thought. revised fourth-quarter g.d.p. numbers released today by the commerce department show expansion at 2.8%. and the u.s. treasury is asking u.s. banks to keep a close eye on accounts held by senior libyan political officials. it wants to head off any chance of the libyan people's money being looted. still ahead, what threat does the oil price spike pose to stocks? we talk with "market monitor" marshall front, of front barnett associates. also we meet the family behind chicago's giron books and learn how they're battling the big bookstores and winning. a landmark vote in wisconsin drastically cuts the bargaining power of state workers. republicans in the state assembly pushed the measure, saying it was necessary to balance the budget. and that vote is being closely followed in washington. that's where republicans and democrats are sparring over a spending plan and potential government shutdown as soon as next week. the threat of spending cuts has unleashed a fierce lobbying battle, including a campaign by
the nation's mayors. darren gersh spoke with mayors from mesa, arizona, and elizabeth, new jersey, as they brought their case to washington. >> reporter: mayor smith, you're here, you're a republican, you're here opposing budget cuts proposed by fellow republicans. why? >> i'm not opposing budget cuts, i'm opposing what i believe are the ill advised budget cuts. and we cut a lot in mesa, arizona, but we've done it in a way we believe was responsible and that really got to the meat of the matter and cutting those areas that truly where waste truly existed. the kinds of things we're talking about here we believe are ill-advised. >> reporter: mayor, one of these programs you're here talking about is the community development block grant which sounds hopelessly bureaucratic. can you is explain why is that is so important to the mayors for that program. >> when kennedy was president they were funding programs that
went directly to the city. it was a funding program for cities with 50,000 or more people that got money directly from the federal government. there was a myriad of ways that they work in the community. the president has proposed a 7.5% cut where the republican congress just adopted a 62.5% cut. they're targeting cuts that are ill-advised that really affect the health of the cities throughout our nations. >> reporter: isn't that part of the problem that nobody wants a short term hit to their budget in order to have longer term benefits of getting our deficit in order in actually cracking this problem. >> it's a republican/democrat issue where it has been for hundreds of years. it's who do we cut and when. i mean cdbg energy efficient grant these things work in our cities. not only that we create jobs with that money as well. >> reporter: how many jobs will be at stake in your community. >> 15 to 1700. >> reporter: 1500 jobs.
>> yes, because we partner with our funds, with a lot of non-profits. >> reporter: even with these budget cuts, the deepest budget cuts took place we still have a massive deficit. so where would you cut? you're not going to cut this program, where would you cut? >> i think there's plenty of places in every budget just like we did in mesa where you look at programs or expenditures that don't directly impact citizen services. we've done that in mesa. we have cut almost 20% of our budget. we reorganized, we restructured. we know, and cities in general since we balance our budgets, know what it's like to cut expenditures and have a minimal impact on our services. >> reporter: are you coming to congress and say here is where you should cut instead. >> congress, we're not pointing fingers and saying what is which. we're just trying to educate congress as to the impact this will have on their constituent. this is an expenditure that we get we can leverage sometimes three and two times over.
if you cut this you're not cutting an actual amount you're cutting in some cases up to two or three times because non-profits match those grants. we get a lot of mileage out of this money we get. >> reporter: the sounds like the mayors are coming to washington and saying we understand you have a problem but don't make it our problem, find it somewhere else. everybody in one way or another everybody's come to congress and saying find it somewhere else. >> congressmen don't solve the problems. senators don't solve the problems of the constituents in our cities, mayors solve the problems. >> i think that's the thing. once again and these cuts, deficit or not yes terrible but the costs don't go away. that's the main thing. and the question is, is the cities have to bear all of the costs for all of society's ills and all of the things. that's where we're finding the cities. states are cutting budgets by literally transferring obligations to cities. now the federal government is cutting their budget by transif you aring obligation of the cities. these expenses these costs about
>> tom: here we are, two months into the year, and we saw the most volatile week. let's get you updated. the week ends on an up note for stock investors after three days of losses. it was a short trading week due to the president's day holiday. thanks to the stiff selling on tuesday and wednesday, the dow lost 2.1%. the nasdaq squeaked out gains yesterday and today, but still fell 1.9% for the week. and the s&p 500 shed 1.7%. all three were at post-recession highs a week ago. while the financial sector led the broad market, intel was the best gainer inside the dow industrials, up 3%. very actively traded. shares have been unable to get above $22 since last may. today, citigroup thinks computer sales will turn around in march after a weak beginning of the year.
that helped out intel. the citi analyst also mentioned advanced micro devices and marvell as benefiting from a pick-up in computer demand. a.m.d. added 2%. marvell jumped 5% on the optimism. more signs the advertising market is finally picking up. interpublic jumped 8% on heavy volume. just shy of new 52-week high. a strong earnings report and confidence in the future, as evident by a new dividend and stock buyback plan. beyond advertising, cbs shares popped almost 7% to a new 52- week high. nice rally here, almost doubling from summertime low. it predicts an increase in revenues from what other tv station owners pay to broadcast its programming, in addition to the cash it gets from cable and satellite providers. other tv network owners, newscorp, comcast, disney each saw buying interest as well. a threat to the tv business has been apple. now we saw a small gain today ahead of next week.
on wednesday, the company is expected to unveil a new ipad. now that ipad and the iphone have been good for apple and its suppliers. among those is omnivision. it makes semiconductors for digital cameras, such as the one in the iphone. shares rocketed 32% on huge volume after a blockbuster quarter and a strong outlook. j.c. penney's last quarterly earnings came in a penny ahead of estimates. sales improved in men's clothing and beauty products. but despite the earnings, shares fell more than 6% on heavy volume. we'll roll out the share price here. they have rallied nicely though since august. may have been profit-taking today. nutrisystem shares went on a crash diet, tumbling more than 31%. revenue dropped in the latest quarter and the outlook was weak. a big move lower. and that's tonight's "market focus."
>> tom: google is changing how its internet search engine works. the online giant wants to cut down on what it calls "low quality" sites showing up in its search results. those are typically content sites that aggregate information from all over the web. the tweaks google is making will mean sites with original content should rank higher in a list of results. this is not a small change. it will affect nearly one in every eight searches. here's what we're watching for next week: our friday "market monitor" guest is chris orndorff, portfolio manager at western
asset management. lots of news, including february vehicle sales are out tuesday. we'll also hear from federal reserve chairman ben bernanke. he gives his semiannual testimony to congress tuesday and wednesday. monday, we look at why the first trading day of the month is often good for stocks. another retailer may be up for sale. this time it's teen clothier delia's. published reports say the company is looking for buyers, including private equity firms. delia's is facing big competitors, like kohl's, for its key customer: teenage girls. and its stores are primarily in malls, which have seen traffic fall in the recession. just last month, another teen retailer, blue anchor, said it was going out of business. >> tom: a major disconnect for t-mobile. subscribers bailed on its contracted cell phone plans in the fourth quarter of last year. the wireless carrier lost 318,000 subscribers, a company record. those customers had to go someplace. in the same timeframe, at&t, verizon wireless and sprint nextel all say they added
but that hasn't hurt the appetite for stocks from tonight's "market monitor." he's marshall front, chairman and chief investment officer at front barnett associates, with about $500 million under management. he joins us from the c.m.e. group in chicago. >> thanks, tom. >> tom: so what do you think of these energy prices lately. much more pressing the economic recovery. >> if they're sustained and they continue to move up, i think we're going to find that they do impact. at this point we see less than a two tenths of a percent on gdp for 2011, but this is an issue that has to be monitored pretty closely. >> tom: what about the impact of the ending of fiscal and monetary efforts? in other words, stimulus spending by the government coming to an end as we move into the latter half of the year and of course the federal reserve due to wind up its bond buying binge in june. is that going to impact the second half of the year in term of the economy and the market? >> i think if you -- cap it's
going to indicate that it will keep the economy, be another head wind to the economy for certainly into the second half of this year. but not a monumental one. >> tom: without a monumental impact a come picks you brought along here including the technology and we used the exchange traded funds to ill trait x.l.k. here. what makes you like technology moving on into the next half of the year? >> these are companies with huge cash flows, businesses preferred, making investments in technology for a number of years. certainly during the downturn and even early in the upturn as they try to keep costs under control. now we're seeing companies beginning to spend more and we think that spending, along with new product cycles, is going to extend the technology boom for the next several years.
>> tom: is it helpful that much of technology not dependent on energy prices? >> that's part of it. but i think beyond that, people see, in business see the productivity enhancement of technology and it's a very very important driver of profit growth. >> tom: you also like industrials and here again we're using the ishare trader phone, xl.i, the firk symbol has a nice rally until this past week was selling pressure. is this as much a play of u.s. recovery as it is global? >> it's global really. of the companies in that exchange traded fund that are weighted heavily have global businesses, companies like john deere, cat per tracker. these are businesses that can do well if the global economy continues to expand as we think it will. >> tom: you expect it to expand faster than the u.s.?
>> i think the developed markets are likely to move pretty much with the u.s.'s growth, but i think that growth in places like china, india, indonesia, vietnam, eastern europe and so forth are likely to grow twice or three times the u.s. growth rate, nine to 10% versus three, three.75% in the u.s. >> tom: back on july 30th the last time we spoke with you marshall, we liked a couple of big banks, multinationals out there. bank of america up 1%. j.p. morgan chase had a nice rally, 16%. do you still like these two? >> yes, we do. many of these bank recommendations were based upon milestones, positive milestones that peas banks would -- these banks would achieve over the next year or two including a significant improvement in their credit situation. and now dividends are being talked about actively among some of the best banks including j.p.
morgan. so we see the prospects for banks continuing to be good as the economy expands and their credit picture heals. >> tom: okay. how about disclosures tonight. do you or the clients own positions. >> we have bank of america, we have j.p. morgan among other banks and we have substantial holdings in industrial companies that are included in that etf that you mentioned. >> tom: this friday evening, it's marshall front with front barnett associates. in chicago's hispanic neighborhoods, a small chain of family bookstores has linked immigrants to their homelands for more than fifty years. libreria giron has survived competition from big-box bookstores and internet retailers. but electronic books could be its biggest challenge yet. in tonight's "all in the family," diane eastabrook tells us the giron's connection to their community could help them defy the odds. >> reporter: libreria giron is a kind of cultural oasis for chicago's hispanic community. >> we see the esoteric books, the dream interpretation books,
angel books, what is happening with our subconscious. >> reporter: juan giron strolls the aisles of one of the three book stores he owns with his mother, ada, and sister, patty. but giron doesn't just sell spanish-language books to consumers. it also runs a business that distributes them to some of the nation's largest retailers. >> so this is going to a walmart store where? >> yes this one is going, i believe, to denton, texas. >> reporter: libreria giron and distributor giron books have just fifteen employees between them, but patty says this family firm is a textbook example of why bigger isn't always better. >> older people especially comment, "oh, they took me to this bookstore, i went up and down the stairs and i can't find my books. i come here and you know exactly what books i have already and what books i like." >> reporter: giron books started by accident in chicago's scrappy pilsen neighborhood in 1957. guatemalan immigrant julio giron opened a television repair shop where his wife ada sold spanish-
language books on the side. soon, book sales eclipsed t.v. repairs, giving julio the idea that bookstores could become as popular as fast food restaurants. >> he said, "you see mcdonalds? we can be like this. we can be bookstores, spanish bookstores." >> reporter: but julio died just as the company was expanding. juan had just entered college, so he was forced to juggle classes while helping ada run the family business. >> we had a very good business, and you needed just to buckle down and get in there. >> reporter: after college juan got a radical idea: why not be a book distributor as well? that paid big dividends later, when big-box retailers and internet sellers like amazon took off. >> because of the fact that we're in the neighborhood... we're in some of these enclaves and we're able to listen to our customers. and then we're able to tell the big-box companies what we're seeing in the general landscape.
>> reporter: juan points out some of the more popular hispanic book trends the company tapped early, like inexpensive, throw-away books. >> it's a simple book with no pictures. this one is on juices and its medicinal properties. >> reporter: and books about mexico's drug cartels. >> these are different type of material that help us understand what is happening in our country. why are we going through this turmoil? these books identify some of the areas that are hometowns for some of our customers. >> reporter: despite giron's success, the company's biggest challenge could lie ahead. electronic books are cutting into sales. that is hurting both giron and it's big-box customers, including borders, which recently filed for bankruptcy. but juan is hopeful the challenge will become just another chapter in the company's history. >> we need to continue to convert some of our content into electronic format, and be able to be the broker of electronic content to our customers. >> reporter: while the girons
have seen other bookstores disappear around them, they think their business can stand the test of technology and time. >> i expect to continue for many years to come. >> reporter: diane eastabrook, "nightly business report," chicago. >> tom: that's "nightly business report" for friday, february 25. thanks for joining us. a quick reminder, catch us online at nbr on pbs.org. or on twitter, @hudsonnbr. i'm tom hudson. good night, everyone. we hope to see all of you again next week. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you.